KFinance glossary

Knock-Out Option

Quick definition

An option cancelled once a price barrier is hit.

Overview

A knock-out option is a type of derivative that is automatically cancelled if a set price barrier is reached, capping the risk involved.

Common Uses

  • Risk management
  • Market speculation
  • Hedging strategies

Examples in Small Businesses

  • Limiting potential losses
  • Optimising investment strategy
  • Managing currency fluctuations
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